The post-earnings announcement drift is a really cool way to exploit investor underreaction. The essence of post-earnings announcement drift is that when a company presents results and surprises expectations to the upside, the share price will react positively on the day of the announcement but then continues to drift higher for weeks and sometimes months as investors digest the news. This drift is stronger for less liquid small-cap stocks and stocks that are less covered by research analysts because in these cases new information travels more slowly.
Why the post-earnings announcement drift happens
Why the post-earnings announcement drift…
Why the post-earnings announcement drift happens
The post-earnings announcement drift is a really cool way to exploit investor underreaction. The essence of post-earnings announcement drift is that when a company presents results and surprises expectations to the upside, the share price will react positively on the day of the announcement but then continues to drift higher for weeks and sometimes months as investors digest the news. This drift is stronger for less liquid small-cap stocks and stocks that are less covered by research analysts because in these cases new information travels more slowly.